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OPINION | A Five Per Cent Growth May Not Sound Too Good But It's Not Quite Death

A slew of measures taken by the government will help achieve a 6.5 per cent growth in 2020-21, writes Bibek Deb Roy, the chairman of the economic advisory council to PM Modi

OPINION | A Five Per Cent Growth May Not Sound Too Good But It's Not Quite Death
Photograph by PTI
OPINION | A Five Per Cent Growth May Not Sound Too Good But It's Not Quite Death
outlookindia.com
2019-09-27T10:58:47+05:30

It is human to focus on the transient. By transient, I mean 5 per cent real growth in Q1 of 2019-20, which has caught most people, not just the RBI, unawares. As most people probably know, methodology and database for national income ­accounts was revised in January 2015 and the base year bec­ame 2011-12. Hence, a comparable series cannot be dragged back beyond 2011-12, nor can growth rates be dragged back bey­ond 2012-13. Let’s track the quarterly real GDP growth rates since 2012-13. What’s immediately evident is volatility. In 2012-13, a 4.9 per cent growth in Q1 was followed by 7.5 per cent in the immediate next quarter. Likewise, 5.3 per cent in Q4 of 2013-14 was followed by 8 per cent in Q1 of 2014-15, the immediate next quarter. In 2014-15, a growth of 5.9 per cent in Q3 was followed by 7.1 per cent in Q4. One quarter’s dip shouldn’t be interpreted as India being on a growth trajectory of 5 per cent, as some people have suggested. Past statistics don’t prove that proposition. If anything, they prove the converse. Predicting the future is fraught with problems. With trade-related skirmishes and oil-related unpredictability, there is more than one question mark. That knocks out, at least temporarily, a key driver of growth—net exports. Nevertheless, for 2019-20 (the full year), no forecaster has projected a growth rate lower than 6.2 per cent. That’s not dismal, though a 6-6.5 per cent band isn’t good enough, which goes without saying. The National Sample Survey Organisation’s Periodic Labour Force Survey, 2017-18, shows employment creation hasn’t been as high as hoped, and that higher growth and better composition of growth are critical for better performance.

At one level, the dichotomy between the prism of structure and the prism of cycle is sterile and puerile, since there are elements of both in what’s going on. A lot of economists have listed structural constraints to growth, expecting the “government” to resolve them. There is a long-forgotten discussion paper brought out by the Department of Economic Affairs in 1993, spelling out the task ahead, “two years after the reforms”. At the time, that agenda was labelled second generation. In telecom, fifth generation may be different from second generation. Not in the domain of economic reforms. Barring the financial sector, not much has changed between 1993 and today’s structuralist agenda. That second generation is today’s fifth generation. The reason is obvious. The “government” has elements of state governments (land, labour, environment, agriculture, several kinds of infrastructure, efficient public expenditure), legislature (Parliament, state assemblies) and judiciary (a prominent lawyer has rec­ently blamed the Supreme Court for the slowdown and there is the National Green Tribunal too). The Centre has limited ­degrees of influence over these. Hence, such reforms are slow and steady rather than a big bang. They continue to remain on the agenda. Some economists found it difficult to push these ref­orms while in the Union government. Now that former ­insiders have become outsiders, they expect the incumbent Union government to deliver quick fixes.

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